What are STPIs?
STPI stands for Software Technology Parks of India. When it comes to the information technology sector, India is one of the leading countries. Software Technology parks have been one of the significant contributing entities to the information technology sector.
The Software Technology Parks of India (STPI) are a society which was established by the Indian Ministry of Electronics and Information Technology in India.
STPIs aims at promotion and boosting of the Software Exports from India. Training, consulting, and implementation services via internal engineering resources are also provided.
These also indulge in System Integration, Services Cover Network Design, Maintenance and Operations of application networks and other facilities available in varied areas.
In India, STPIs also follow to ISO 9001 certification. The process management of the STPIs is based on the Quality Management System.
Software Technology Parks are a lucrative business sector in India, which has resulted in a large number of STPI registrations in recent years.
Objectives of Software Technology Parks of India
In India, STPIs were created for the following reasons:
- Promotion of development and exporting the Software and the software services that include Information Technology Enabled Services/Bio-IT.
- By implementing the STPI/Electronics and Hardware Technology Park Schemes and such other schemes that may be framed from time to time, the STPIs aim to provide such statutory and promotional services to the exporters.
- Providing data communication services and that include value added services pertaining to IT and ITES related industry.
- Promotion of the micro, small, and medium entrepreneurs via the creation of a conducive environment for entrepreneurship in the field of IT/ITES.
STPI Registration Procedure
The procedure of STPI registration in India is quite elaborate and requires multiple compliances.
- Application for STPI registration has to be made in the prescribed form to the Software Technology Park of India.
- Legal documents, including the Memorandum of Association, have to be submitted along with the application.
- A Board Resolution stating the setting up of the STP unit, duly signed by the persons who are authorized to submit the application form.
- Resume of the CEO or the person heading the operation
Detailed Project that has the following elements:
- Profile of the company
- Background of the promoters
- Areas of expertise and the proposed services to be offered
- Marketing strategies and arrangements
- Manpower plan
- Future plans
- A detailed list of capital goods that have been planned for procurement, from India as well as abroad
- A copy of the floor plan of the STP, duly certified by an architect
- Details of the foreign collaborator
- A summarized write up on the parent company and the activities that have been proposed for being carried out by it
- Copy of the invoice issued by the Internet Service Provider
- Copy of the Rent Agreement, if any
Financial statements of the company, including:
- Projected Balance sheet
- Projected P&L Account
- Workings of Export
- Projected Cash Flow and fund flow statement
- Financials for five years that projects income from capital expenditure, cash flows, and operations
- Details pertaining to the estimated number of employees and the wage bill for the initial five years
- Details pertaining to the aggregate foreign exchange outgo and comings in the first five years
- Other documents like the copy of the service agreement that has been signed with the parent company/clients/PO or the Master Services Agreement.
- Filing the Monthly SOFTEX form, quarterly and annual returns, with STPI within the regulated time frame and the prescribed fee.
Which Companies can be Registered as STP?
In India, the following companies can go for STPI registration:
- An Indian company
- A subsidiary of a foreign company
- A branch office of the foreign company
Benefits available to the STPs in India
A company can avail following benefits post STPI registration:
- Exemption in full of Customs Duty on imports
- Exemption in full of Central Excise Duty on indigenous procurement
- Equipment from abroad can be imported on a loan or lease basis
- Permission of 100% Foreign Direct Investment via automatic route
- Permission to import al necessary equipment or goods including second hand equipment, except the legally prohibited items
- Using the imported computer for permissible training, subject to certain conditions
- Accelerated rates of depreciation up to 100% is permissible on computers
- Sales in the Domestic Tariff Area (DTA) with up to 50% of the exports permissible
- As per Section 10A of the Income Tax Act, the STPs are given Income tax holiday
- The STPs have green card enabling priority treatment for government clearances and such other services
Compliances for STPs
Periodically, the STPs have to make Statutory Reports and Statutory Compliances for STPs.
Statutory Reports for STPs
Monthly Reports – All the units registered with STPI are required to submit Monthly Progress Report by the 7th of a month, upon completion of the previous month.
Quarterly Reports - All the units registered with STPI are required to submit Monthly Progress Report by the 10th of a month, upon completion of the previous quarter.
Annual Performance Reports – These are required to be submitted as per the prescribed format.
Statutory Compliance for STP units
Accounts – If any entity is working simultaneously as a domestic unit and STP. It shall be required to have two separate accounts, which includes bank accounts.
Even though it is not necessary to be registered as a separate legal entity, but a clear demarcation should be made between the exports/imports of the STP unit and the imports/exports of he other units of the enterprise.
The obligation on STP units
- Development or production can be carried out only in the customs bonded area
- The operations have to be commenced within the gestation period
- Giving intimation to the STPI regarding the commencement of operations
- The constant renewal of the customs bonding license
- Maintaining the necessary records and documents
- Obtaining Export certification
- Duty payments and debonding the unit
- Obtaining permission from the Ministry of Finance for external borrowings
The Software Technology Parks of India scheme was implemented by the Government of India is a 100% export-oriented scheme that was focused on the development and export of computer software.
STPI registration is a complicated legal procedure and requires multiple documents to be prepared and authenticated by different authorities. For an entity to become a registered STP with STPI, it has to undergo various legal procedures.
Out team of in-house legal experts has years of experience with STP registration and can help you with every aspect of the same.
For more information on STPs in India and related matters, contact us.